The Government is predicting a decline in revenues from stamp duty next year, as well as a sharp slowdown in revenue growth from capital gains tax and customs duties.
The tax profile for 2006 was published yesterday by the Department of Finance. It forecasts that total tax revenue will rise by € 2.4 billion, an increase of 6.1 per cent over 2005. In 2005, total tax revenues were 10.3 per cent higher than in 2004.
Revenues from stamp duty are expected to fall by € 40 million, an annual decline of 1.5 per cent. Stamp duty revenue grew by 30.5 per cent last year and added € 636 million to the Government's take from the economy.
Capital gains tax revenues also grew strongly last year, by € 444 million in absolute terms and by 29.3 per cent in percentage terms. Capital gains tax is forecast to grow by a much more modest 3.8 per cent this year.
Capital acquisitions tax revenues are expected to grow by €10.7 million, or just 4.3 per cent, compared to an increase of €59 million, 30.9 per cent, last year.
Taken together, stamp duty, capital acquisition tax and capital gains tax are projected to add only € 45 million to the Government's tax take next year. This compares with a combined addition of € 1.1 billion in 2005.
The forecasts for stamp duty and capital gains tax imply some contrast in outlook compared with the forecasts of some commercial banks, which predict strong growth in the property market to continue. Last week, Irish Intercontinental Bank (IIB) economist Austin Hughes said that house prices were set to grow by 8 per cent in 2006.
A slowdown is also expected in VAT receipts, from 13.1 per cent last year to 8.3 per cent in 2006, while income tax receipts are expected to grow more modestly from 5.8 per cent last year to 4.8 per cent last year.
However, the Government expects corporation revenue growth to jump from a disappointing 3 per cent last year to 9.8 per cent this year.
The 10 per cent corporation tax rate applying to firms operating in the IFSC expired on December 31st, from when all financial corporations will pay the standard 12.5 per cent rate.
However, analysis released yesterday by Hibernian Investment Managers (HIM) commented on the release of SSIAs next year. "The Exchequer take from SSIAs could be as high as € 1.5 billion," predicted James Forbes, senior HIM investment strategist. Approximately one-third of SSIA funds are expected to be released into the economy this year, with the remainder due for release in the first half of 2007.
